LinkedIn To Raise $1 Billion Via Follow On Offer

LinkedIn raises $1 Billion

LinkedIn Corporation (NYSE: LNKD), the largest professional network on the internet, announced a follow on offering of $1 Billion of its class A shares. The issue will be managed by J.P. Morgan Securities and Morgan Stanley as the lead bookrunners.  LinkedIn had come out with an IPO in May 2011 and the stock has increased more than 5 times since then, having seen an increase of over 130% in the year-to-date.  Though the stock has gained substantially, the company hasn't been able to generate earnings to match the stock price gains. The new issue comes at a time when the P/E of the company is over 700 and these levels of P/E aren't probably attractive for investors.

The company’s latest quarter earnings have been moving in the right direction. LinkedIn’s increased focus on digital publishing and improving its revenue generation capability will probably give the earnings a momentum which had been missing till now. The issue from the company comes at a perfect time, considering the attractive pricing the company currently enjoys in the market. Though the issue looks overpriced, the funds will help the company expand geographically and may generate earnings growth in the long term. This $1 billion fund infusion, along with its existing cash balance of about $870 million, raises the possibility of the company going in for a strategic acquisition. LinkedIn recently acquired Pulse, the popular mobile news service. The announcement came after market close hours on a day which saw the stock gain over 2.5% in regular trading session. However, following the announcement the stock price dipped by 2.1% in after-hours trading.

To see LinkedIn’s latest stock price movement, click here (NYSE: LNKD)

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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Comments on this article and LNKD stock

The $1 Billion FPO does raise a possibility of an acquisition by LinkedIn. A successful issue will provide the company access to total cash of about $2 Billion, which is way higher than what the company has historically maintained in its books. A growing company like LinkedIn would need such amounts of CASH in case of sudden expansions, and sudden expansion generally happens through inorganic means which includes the growth through acquisition route. Wont be surprised if the company announces an IPO anytime soon.
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